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PM Post - Heading Out with Good Prices

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THE OPEN

Nov beans:  10 1/2 higher

Dec meal:   2.70 higher

Dec soyoil:  21 higher

Dec corn:  2 1/4 higher

Dec wheat:  2 1/2 higher

The markets opened as called and quickly tacked on more gains with an extension rally on short-covering activity.  The soy complex tacked on the best gains as buy-stops were triggered over recent highs.  Floor chatter and rumors of bean purchases off the PNW set the tone for a more aggressive short-covering rally, all before the 11:00 hour.  Support was viewed from news stories stating that Taiwan would be expected to sign a letter of intent to buy $3.6 bln of US grain and meat in Washington next week, which would include beans, corn, wheat, and meat products.  Hogs locked limit up on possible Chinese business.  

Post report would say that panic buying in the bean market was the catalyst for trade towards the $9.00 Nov top as funds were clearly positioned short and not ready for some of the more positive news items that took place today.

Farmer selling remained fairly light even as prices worked towards new highs for the move upward.

At 11:00 the USDA report was released as follows:

USDA Grain Reports Summary 09/12 11:17

U.S. PRODUCTION (Million Bushels) 2019-20

                      Sep       Avg      High       Low       Aug   2018-19

Corn                13,799    13,614    14,003    13,040    13,901    14,420

Soybeans             3,633     3,596     3,745     3,499     3,680     4,544

U.S. AVERAGE YIELD (Bushels Per Acre) 2019-20 (WASDE)

                      Sep       Avg      High       Low       Aug   2018-19

Corn                 168.2     166.7     170.7     163.0     169.5     176.4

Soybeans              47.9      47.2      49.0      46.0      48.5      51.6

U.S. ENDING STOCKS (Million Bushels) 2018-2019

                      Sep       Avg      High       Low       Aug

Corn                 2,446     2,398     2,460     2,280     2,360

Soybeans             1,005     1,043     1,084       990     1,070

U.S. ENDING STOCKS (Million Bushels) 2019-20

                      Sep   Average      High       Low       Aug

Corn                 2,190     1,965     2,269     1,570     2,181

Soybeans               640       661       797       565       755

Wheat                1,014     1,014     1,037       909     1,014

WORLD ENDING STOCKS (Million metric tons) 2018-2019

                      Sep       Avg      High       Low       Aug

Corn                 329.6     329.6     332.3     327.0     328.6

Soybeans             112.4     114.1     115.9     113.0     114.5

Wheat                277.2     275.3     276.9     272.0     275.5

WORLD ENDING STOCKS (million metric tons) 2019-20

                      Sep      Avg.      High       Low       Aug

Corn                 306.3     301.8     307.0     292.7     307.7

Soybeans              99.2     101.6     119.0      97.0     101.7

Wheat                286.5     285.5     288.1     283.0     285.4

Gist of report was bullish beans, neutral to bearish corn, and neutral for wheat.

Beans:  Changes for 2018/19 included higher exports, which increased by 45 mln bu to 1,745 mln bu on trade inspections data from July - August indicating higher shipments.  Crush was raised 20 mln bu to 2.085 mln bu.  Bean production was lower with average yield at 47.2 bpa.  2019/20 ending stocks were under the trade estimates at 640 mln bu.

Corn:  2019/20 production was lower at 13.799 bln bu, down 102 mln bu from a month ago, but the trade was expecting less.  Corn to ethanol was lower for 2018/19 at 6,805 mln bu vs. 6.855 mln bu mo ago.  The corn yield was lowered to 168.2 bpa, but was over trade expectations in general.  Corn exports for 2019/20 were lowered to 2,060 mln bu vs. 2.100 mln bu due to stiff competition from Ukraine and South America.  The report did not include many bullish items, but funds took advantage of a price drop to cover something in.  

Wheat:  The report was considered neutral with few changes.  Lower production was noted for Australia, down 1 mmt to 19.0 mmt, and for Kazakhstan, down 1.5 mmt to 11.5 mmt, the lowest output since 12/13.   

Reaction to the report was technically interesting with grains posting outside days of trade while bean prices continued to head upward.  Net-net, today was a constructive day in terms of chart price action, particularly for corn which matched previous contract lows but did not break them.

SOY

  • The soy complex started the day higher but prices put on the best rally when rumors of Chinese bean purchases circulated on the trading floor creating a short-covering rally that triggered buy-stops in beans.  
  • Products tacked on additional gains.  Dec soyoil charts, which were already in the process of moving higher, traded up to key resistance with a 40 plus rally into 2933c.   
  • Stats Canada forecast the canola harvest at 19.4 mmt, down 4.8 percent and the smallest production in 4 years, which was supportive for soyoil.     
  • Beans triggered buy-stops over the 100-day moving average at $8.85, with more panic buying post report as funds used setbacks to cover in some of their short position.  
  • Dec meal prices triggered buy-stops over the top of the downtrend channel at $299.00 to turn charts sideways from lower, also constructive.  
  • The Nov/Jan bean spread narrowed into 13 1/4c from overall lows at 14 1/4c while Dec/March meal remained at a wider $4.90-$5.30 carry into the report data.  Volume on the trade today was large, which supported values at their highs.  

GRAINS

  • Grains were firmer but lagged the aggressiveness of the soy complex rally at the start of the trading session.
  • Dec corn slowly made its way up towards first resistance in the Dec contract at $3.63, following higher beans before the report.  
  • Spreads were slightly weaker with Dec/March trading into 12 1/4c and out to 12 3/4c.  
  • Dec wheat prices triggered small buy-stops over double highs at $4.83 1/2 to trade up to the next level of resistance at $4.86.  
  • The report was neutral for wheat but neutral to slightly bearish for corn.  Post report, corn traded lower on the day nearly taking out contract lows at $3.52 1/4, only to recover and trade to new highs in terms of recent trading range activity at $3.67 1/4.  
  • Dec wheat prices recovered but also show more signs of chart stability, holding the $4.70 level on a break.  Both charts are now posting outside days of trade, so holding the lows becomes imperative.  
  • The Dec/March corn spread traded from 12c to 13 1/4c while Dec 19/Dec 20 traded out to 44 3/4c before finding some support and trading back towards 40 1/4c.  

AT 12:00 THE MARKETS ARE AS FOLLOWS:

                                                     HI                               LO

Nov beans:  23 higher             8.93                              8.69

Dec meal:  6.00 higher            301.50                         294.90

Dec soyoil:  2 higher               2933                            2882

Dec corn:   4 higher                3.67 1/4                       3.53 1/4

Dec wheat:  4 higher              4.86                             4.72 1/2

OUTSIDE MARKETS

The Dow put in a sharp opening rally but was only 20 pts higher on profit-taking on new chart highs.  Crude oil traded down to $54.00/barrel, while the US dollar faded after trading to 99.09, close to recent highs.  

CLOSING COMMENTS

Today has been a technically interesting day, with funds net short across the board and prices not in their favor.  Though corn is not following beans, there is more chart stability now having posted double lows at $3.53 in Dec. with an extension higher towards $3.70.  No doubt that some will be looking to sell a rally towards $3.70 Dec corn as we now appear ready to work into trading ranges off the lows.  

In the past, the Sep. report has been one that could set a seasonal low.  Harvest is late, and that could make a difference.  But the charts are looking better now, and an outside day of trade in the grains with a good close will set the tone for more short-covering tomorrow.    Look to probably head out with good closes as more shorts hunt for pullbacks to buy.

Have a good evening......

 

WPI on Twitter

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